Real men don't depend on taxes

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tenthtee's picture
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Joined: 2006-11-16

Nettles brought up an interesting topic (excessive regulation) and Mad made an interesting point about economic ignorance. One day does not a market make, but it looks like current economic policy is a disaster. Will Americans vote for less government and taxation? Even some of my liberal clients are getting fed up with the status quo. Big wildfire, big changes, this is a good RR link about taxation:http://blog.registeredrep.com/von_aldo/2010/08/10/497/ 

loneMADman's picture
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Joined: 2010-05-10

I don't think it's a mystery what Americans will vote for - less government and taxes.  They only choose an alternative when we are on the brink, as we were two years ago. But there's a difference between good politics and good policy.  All anyone seems to talk about anymore, including the news networks, is politics, which is probably why the country can no longer reach any consensus on good policy.  On tough issues, the two are usually incompatible.  But back to the subject at hand.  In the long run, we do need to address the deficit.  The key elements need to be:

  1. (a) Reduce entitlement benefits, especially to the baby boomer generation who, since they've been in charge, have done nothing but lower their taxes and increase their benefits.
  1. (b) Reduce military spending.  Folks we spend almost as much as the entire rest of the world combined.  It's time for our allies to start pulling their weight.  We may have a great military, but most of our allies live longer, work less, have better retirement security, better primary education, and essentially the same economic standard of living.  That's not advocacy for a progressive agenda, it's just a statement of objective facts.  And the main reason they have these things is not that they pay higher taxes, although many do, it's that they don't have this huge military industrial complex to support.  Besides, to terrorists, a giant military is more of a target than it is a deterrent.
  2. (c) Adopt a simpler, fairer tax code.  I'm not just talking income taxes, but payroll taxes, sales taxes, property taxes, etc. These need to be look at holistically and streamlined.  Their needs to be a better balance between the burden placed on work and that placed on wealth.  The subtle change in the tax code the last 30 years is that the amount paid by people who work and spend, including individual W-2 income taxes, payroll taxes and sales taxes as a portion of all tax has soared, while the portion from corporate income, capital gains and interest income have fallen precipitously.  No wonder working people feel they pay more than their fair share of taxes.  Relative to 30 years ago, they do.
  3. (d) Improve education.  We need to prepare kids for the modern work force and our schools are failing miserably.  As a consequence, even college grads are struggling to find careers that will earn sufficient income to afford a middle class lifestyle and contribute meaningfully to tax revenue.  Education reform starts with school reform and here, you have to give Obama credit in that he is at least selectively willing to take on the status quo and teachers union.  We also need more emphasis on developing skills and less on memorizing generic knowledge that anyone can look up.
  4. (e) Incentivize businesses to hire Americans.  This goes hand-in-hand with improving education but would also include eliminating employer payroll taxes, imposing real and substantial penalties for hiring undocumented workers, and closing tax breaks for companies who move jobs and profits offshore.
  5. (f) Improve our infrastructure.  Massive leaps in productivity have generally followed substiantial public and private sector investments in infrastructure like railroads, electrification, the interstate system, and airports.  Our infrastructure today, rather than improving, is in decline.  This cannot be good for commerce, our future economy and deficits.  It's unfortunate, but these kinds of systems, require investments so massive and interdependent that the ROI for any individual business will almost always be negative.  Public investment is usually necessary, but, when done well, nearly always pays for itself in future economic growth.

There's no simple fix for a problem of this magnitude, but the good news is that the deficit is a problem, not a crisis.  We have time to deal with it, but we have to work on good policy, not good politics.  You may say this is IMPOSSIBLE!  Well, it's hard, but we're Americans and we can do hard things.  The first thing we do is take these issues out of the political realm (i.e., Congress).  When we needed to close hundreds of military bases in the 90's, we set up a bipartisan and non-partisan commission of experts and had them make comprehensive rather than one-off recommendations.  It wasn't perfect, but it worked pretty darn well.  We need something on an even bigger scale to tackle the deficit.  Incidentally, Obama proposed something similar, but more modest, and Republicans (nearly unanimously) and even some Democrats shot it down.  Just shows Congress isn't really serious about this issue.  It's just politics.

tenthtee's picture
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Joined: 2006-11-16

Mad, well said. Politics has always been about building consensus. Too far right or left, and there is none. A smaller pie is a tougher pie to share, though. We all know why the pie is not growing much. Wouldn't you agree, at least part of the the problem is, there is no clear vision for where we want to be headed?Big corps and big government, unions and special interests are not the "leaders" we should support. If Bush was a sell-out, so is Obama. It looks like a few folks are starting to figure it out: http://online.wsj.com/article/SB10001424052748704901104575423674269169684.html?mod=WSJ_hps_LEFTTopStories

loneMADman's picture
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Joined: 2010-05-10

Tenth, I don't think either Bush or Obama intended to be a sellout, but the lack of a clear vision for where we are headed is indeed the key missing ingredient for both. Bush had muddled thinking and lost control of his government to the Neocons.  During the campaign, Obama seemed to have it.  But I think the magnitude of the crisis, as well as the Republicans unyielding opposition and superior politics, have derailed him a bit.  Worse yet, the Democrats have weak leaders in Congress.  Reid and Pelosi are not strong advocates for the Obama, or any, agenda.  He has to try to succeed in spite of them.  I think best outcome:Republicans gain significant seats in both houses, but not total control.  They replace their leadership and decide they too need a vision and a shared sense of responsibility for governing.Democrats get scared enough to replace their congressional leadership with people who have a spine and can actually communicate with real live human beings.I am certainly asking too much. 

tenthtee's picture
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Joined: 2006-11-16

Yes, I can see where the market will drive political consensus. I don't think we have to worry because the need for America to get its economic sh*t together (to compete with the world) is bigger than our motivation to fight over and spend (borrowed) money or redistribute private capital. It's always about jobs and life getting better. So whether the name is Clinton or Reagan, leadership will emerge that can close the deal and take us to the next level. The only logical attitude is optimism. Your focus list is right on. I'm heading for the beach.  

Moraen's picture
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Joined: 2009-01-22

Good post, I disagree with soem of your points though.loneMADman wrote:I don't think it's a mystery what Americans will vote for - less government and taxes.  They only choose an alternative when we are on the brink, as we were two years ago. But there's a difference between good politics and good policy.  All anyone seems to talk about anymore, including the news networks, is politics, which is probably why the country can no longer reach any consensus on good policy.  On tough issues, the two are usually incompatible.  But back to the subject at hand.  In the long run, we do need to address the deficit.  The key elements need to be:

  1. (a) Reduce entitlement benefits, especially to the baby boomer generation who, since they've been in charge, have done nothing but lower their taxes and increase their benefits.  Agree 100%. 
  1. (b) Reduce military spending.  Folks we spend almost as much as the entire rest of the world combined.  It's time for our allies to start pulling their weight.  We may have a great military, but most of our allies live longer, work less, have better retirement security, better primary education, and essentially the same economic standard of living.  That's not advocacy for a progressive agenda, it's just a statement of objective facts.  And the main reason they have these things is not that they pay higher taxes, although many do, it's that they don't have this huge military industrial complex to support.  Besides, to terrorists, a giant military is more of a target than it is a deterrent.    I've heard this argument before.  Our military does a lot more than protect and defend this country.  Also, your argument of terrorists thinking the military is a good target cuts both ways.  If they are attacking our military (which is trained to fight), then they are not attacking our citizens.  These countries that have what you say, are in fact, often more in debt than the United States and their lifestyle is borrowed.  We also have over 300 million people in this country and there are issues with that.  As for retirement security - who's responsibility is it to have retirement security?  The individual, not the gov't.  Primary education - we'll get to that in a bit.  Economic standard of living?!  I've been to several of these countries and barring Eastern bloc countries (most of which have lower life expectancy than we do), the people there have no concept of economic prosperity.  They are worse than Americans when it comes to spending money they don't have.  They just spend a lesser amount, but a larger proprotion.
  2. (c) Adopt a simpler, fairer tax code.  I'm not just talking income taxes, but payroll taxes, sales taxes, property taxes, etc. These need to be look at holistically and streamlined.  Their needs to be a better balance between the burden placed on work and that placed on wealth.  The subtle change in the tax code the last 30 years is that the amount paid by people who work and spend, including individual W-2 income taxes, payroll taxes and sales taxes as a portion of all tax has soared, while the portion from corporate income, capital gains and interest income have fallen precipitously.  No wonder working people feel they pay more than their fair share of taxes.  Relative to 30 years ago, they do.  Agree.  100%.
  3. (d) Improve education.  We need to prepare kids for the modern work force and our schools are failing miserably.  As a consequence, even college grads are struggling to find careers that will earn sufficient income to afford a middle class lifestyle and contribute meaningfully to tax revenue.  Education reform starts with school reform and here, you have to give Obama credit in that he is at least selectively willing to take on the status quo and teachers union.  We also need more emphasis on developing skills and less on memorizing generic knowledge that anyone can look up.  The problem with our Education system is not so much school reform, as it is to reach further back.  Tons of research has been done that has shown more effective ways to educate our youth.  The issue is that there is a disconnect between policy and research.  There are few incentives for those with the knowledge to work on the policy side.  The policy side is usually riddleed with incompetence and the "second string" of educators.  As for other countries, their systems are even worse.  Most studies conducted where our allies are concerned are ones that track only those who succeed in pubic instruction.  Those who don't are given different "tracks".  Meaning, you might be a hole digger if you get "C's" in school.  This is counter to our ideology in this country.  That EVERYONE deserves the best possible education.  Not just the people who manage to do well in Primary and Secondary school.
  4. (e) Incentivize businesses to hire Americans.  This goes hand-in-hand with improving education but would also include eliminating employer payroll taxes, imposing real and substantial penalties for hiring undocumented workers, and closing tax breaks for companies who move jobs and profits offshore.  100% Agree.
  5. (f) Improve our infrastructure.  Massive leaps in productivity have generally followed substiantial public and private sector investments in infrastructure like railroads, electrification, the interstate system, and airports.  Our infrastructure today, rather than improving, is in decline.  This cannot be good for commerce, our future economy and deficits.  It's unfortunate, but these kinds of systems, require investments so massive and interdependent that the ROI for any individual business will almost always be negative.  Public investment is usually necessary, but, when done well, nearly always pays for itself in future economic growth.  I can see your point, but as technology evolves, there tends to be less and less of a focus on this.  If you mean infrastructure as in network backbones, then I can agree.  I see marked improvements infrastructure around here, and even did during the Bush years.

There's no simple fix for a problem of this magnitude, but the good news is that the deficit is a problem, not a crisis.  We have time to deal with it, but we have to work on good policy, not good politics.  You may say this is IMPOSSIBLE!  Well, it's hard, but we're Americans and we can do hard things.  The first thing we do is take these issues out of the political realm (i.e., Congress).  When we needed to close hundreds of military bases in the 90's, we set up a bipartisan and non-partisan commission of experts and had them make comprehensive rather than one-off recommendations.  It wasn't perfect, but it worked pretty darn well.  We need something on an even bigger scale to tackle the deficit.  Incidentally, Obama proposed something similar, but more modest, and Republicans (nearly unanimously) and even some Democrats shot it down.  Just shows Congress isn't really serious about this issue.  It's just politics. I also agree that it is politics and politics runs this nation.  Some fixes are viable, others are not.

loneMADman's picture
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Joined: 2010-05-10

Moraen,Thanks for the feedback.  I see your perspective on other cultures spending just as much of their disposable income as Americans, but you have to remember much of their "savings" are forced through taxation and come back to them in generous social security benefits.  They don't need to worry as much as we do about savings for retirement.  If you look at the rate of National savings (including public and private), our rate of savings is considerably lower than almost any other developed nation (profligates like Greece excepted).  Now, we can get away with that to some extend by having a younger, faster growing population, but that only goes so far.On education I pretty much agree with you, but I do think we need to do more to reward good teachers and get rid of bad ones.  My daughter had the worst teacher ever this past year.  She went from loving to hating school in one year - first grade no less!  Multiple parents complained about the teacher's performance and seeming lack of motivation.  At year-end 10% of teachers were laid off.  She was not.  It was done strictly on seniority.  And because she's in her early 30's, she could be doing a perfectly lousy job for another 30+ years.  That's a broken system.As for infrastructure, I would absolutely include IT infrastructure.  As much investment as we have made, we have fallen way behind the most advanced countries like Korea and Japan in this regard.  We have to remember that our standard of living is, in the long run, dictated by our productivity.  Without infrastructure investment (and improved education) we will lose our edge.   

Lexicon's picture
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Joined: 2010-05-22

Regarding education reform. The number one reform we need is to eliminate Teacher's unions. Unions are designed with one singular goal. To protect the union workers. The end product (whether it's cars, steel, or education of our children) is not what they are concerned with. By definition then, Unions make the end product less efficiently created (by getting maximum benefit for the union workers). In the city of Dallas TX we have had student population growth of 4% of the last 10 years. Meanwhile our Teachers/Administrators costs have grown by 22%. The ballooning of the education budget is a direct result of inefficient use of capital.Regarding defense spending. It's a matter of ideology. If you favor the idea of the US as the world's policeman/humanitarian defending human rights violations then you have to have an inflated Defense Budget. If you favor the US as more of a 'sleeping dragon' who is difficult to provoke but when awakened strikes swiftly and without remorse then you can have a much smaller budget. The funny thing is Dems want option one but less spending. The two are mutually exclusive.Infrastructure spending in this country is woefully inadequate. Our grid needs to be modernized. Our IT infrastructure needs to constantly be expanded and upgraded. Our waterways and sewer systems are over 100 years old in many metro areas. I think it's no coincidence that the Eisenhower Highway Act of 1956 Was in the middle of the first great Bull market of the post Depression Era (1950-1964). That type of infrastructure spending is accretive to the economy (contrast that to stimulus on unemployment benefits or bailouts which are clearly not).

tenthtee's picture
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Joined: 2006-11-16

Almost everyone agrees, effective education is the gateway to our successful future. It also comprises a lot of our spending. You talk about infrastructure - raising the level of education should be considered #1. Yet, it appears we are incapable of undertaking meaningful reform of public education (raising productivity using developing technology in education, adapting education to serve the needs of our post industrial economy). Especially those who would increase taxes and spend should be held accountable for doing better with the $$$ earmarked for education. How can you support more taxes and regulations (health care and financial reform regulations) when you see the corruption of the public educational system? That is a sad end to the idealism of youth. Too bad it's still politics as usual in America. That is a case for keeping your time, talent and treasure as private as possible. Would anyone here seriously consider starting a second career as a public teacher?Knowing what you do about money and investing, the outcome of that knowledge and experience is usually more conservative (free market oriented). ( The majority of financial advisors are fiscally conservative ). I guess the only cure for fat and stupid in America will be a prolonged session of the School of Hard Knocks. In that sense, I'm optimistic for the long run.

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